European Council Authorises Negotiation on EU-US Critical Minerals Agreement

European Council has adopted a decision,  authorising the European Commission to open negotiations, on behalf of the EU, with the United States on a Critical Minerals Agreement (CMA)

Agreement will seeks to strengthen critical minerals supply chains and mitigate some of the negative repercussions of the US Inflation Reduction Act (IRA) on EU industry.

In August 2022, the US enacted the Inflation Reduction Act (IRA), introducing the Clean Vehicle Credit. This is a subsidy for the purchase of qualifying battery or fuel-cell operated vehicles in the form of a tax credit. To qualify for the full subsidy, a vehicle must, among other things, be equipped with a battery that has had at least some of its critical mineral content either recycled in North America or extracted and processed in the US or a country with which the US has a Free Trade Agreement or a CMA.

According to Héctor Gómez Hernández, Industry, Trade and Tourism Minister of Spain

“The Critical Minerals Agreement will be key in diversifying international supply chains of critical minerals. It will also help to strengthen our cooperation in the context of the green transition. The agreement will grant the EU an equivalent status to US free trade agreement partners for the purpose of the Clean Vehicle Credit under the US IRA”.

The CMA represents an opportunity to increase the attractiveness of investment in the EU’s mining and processing industry.

CMA would contain provisions on strengthening international supply chains of critical minerals and related sectors

It will strengthen the trade in and diversification of international supply chains of critical minerals and promote the adoption of electric vehicle battery technologies by formalising the shared commitment to facilitate trade, and promote fair competition and market-oriented conditions for trade in critical minerals

It will encourage cooperation on international standards for critical minerals lifecycle assessment, extraction, labelling, recycling and transparency, with a view to supporting sustainable supply chains, and help to prevent future barriers to EU-US trade.

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